The global pandemic outbreak brought economic uncertainty to countless communities throughout Colorado. In turn, many experts predicted a slowing real estate market. To the surprise of many, however, this hasn’t occurred. In fact, home prices and sales have actually increased in some of the biggest real estate markets, including Denver and Colorado Springs.
Although it seems counterintuitive, this interesting trend seems to have roots in the same sort of scarcity economics we saw at the beginning of the pandemic. One of the early hallmarks of the coronavirus outbreak, panic buying is a common occurrence during widespread crises. From toilet paper and hand sanitizer to disinfectant wipes and popular food staples, the early days of the pandemic saw grocery store shelves turn bare as people rushed to purchase specific items in bulk.
As certain household products became difficult to obtain, demand increased, and people became willing to pay a premium for items that normally cost relatively little. While this type of psychology was thought to be limited to household items, there seems to be some evidence that it has leaked into the real estate market.
“Whether it’s driven by pandemic-fueled anxiety or limited inventory, buyers have been especially eager to purchase homes in Colorado,” said Jean Wheaton of The Wheaton Team, a top real estate broker in Colorado Springs. “This seems to fly in the face of many predictions from experts who thought Colorado real estate was set up for a major decline.”
A July report from CoreLogic warned that Denver homes were some of the most overvalued in the nation, and predicted steep price declines by the spring of 2021. As we enter the fourth quarter of 2020, the opposite seems to be happening. Not only are prices not falling; they’re rising due to unprecedented demand.
“The Colorado Springs real estate market is having a very difficult time producing enough homes to meet the high demand from buyers,” said Wheaton. “The historic drop in inventory has led to historic prices that have made things great for sellers and difficult for people who are trying to find an affordable home.”
According to industry experts, some of the rising demand is actually owed, at least in part, to the pandemic. Throughout the spring, Colorado temporarily halted open houses and implemented restrictions on showings. This contributed to a local year-over-year home sales decline of almost 28% by May. While the restrictions stymied the market, they also seemed to create a pent-up demand among home buyers who were eager to take advantage of historically low mortgage rates.
With that said, this doesn’t explain why demand has continued to increase. According to Wheaton, the real driving force is scarcity economics.
“As the early days of the pandemic clearly showed, scarcity breeds demand,” she said. “Supply and demand drive virtually every market in the world. Real estate is no different. At this time, motivated buyers are having to grapple with limited inventory, which is increasing competition and driving home prices to record highs. Right now, the local inventory of available homes just can’t keep pace with demand, and there doesn’t seem to be an immediate end in sight.”
The big question right now is whether buyer behavior will normalize once the pandemic ends. Without a clear answer, more and more homeowners are looking to take advantage of the current demand by selling their homes sooner rather than later.
“At The Wheaton Team, we are seeing an uptick in sellers looking to sell while the market is hot,” said Wheaton. “Some are looking to purchase larger homes while rates are low, and others are planning to move out of state to more affordable regions. Whatever the reason, it’s a good idea to strike while the iron is hot.”
In the meantime, until the much-anticipated pandemic real estate slump actually materializes, sellers can expect limited inventory and buyer competition to keep home values high.
For nearly 25 years, The Wheaton Team has specialized in residential real estate in Colorado Springs and the Tri-Lakes Area. Our award-winning professionals have developed a streamlined, three-step real estate system to help buyers and sellers achieve their highest goals.
With an expert staff of real estate professionals, The Wheaton Team is perfectly positioned to guide you through the intimidating home buying/selling process and help turn your dreams into reality.